Texas Estate Planning

What Does Autism Awareness Month Have to Do With Inheritance?

April is Autism Awareness Month (also called Autism Acceptance Month) and we want to make sure that you’re aware of what can happen if you neglect to consider your autistic or disabled descendants and heirs when creating your estate plan. You might have heard of a Supplemental Needs Trust (SNT). Formerly called “Special Needs Trust,” SNT’s are helpful tools in the Estate Planning process if you have a loved one currently receiving (or in the future could receive) means-tested government benefits like SSDI. 

Many folks are familiar with Autism Awareness Month, but in recent years, the autistic community has urged for people to focus on “acceptance,” more than just simply “awareness.” It is important that we accept the needs and perspectives of autistic people especially in regards to the issues that directly affect them and their experience of the world. 

Not every person with autism or other disabilities will qualify for SSDI. And similarly, not every able bodied person will remain that way throughout the entirety of their lives. Our needs and capabilities can change for many different reasons, most of which are difficult to predict, but if you have anyone in your life with a family history of chronic medical conditions (physical, developmental, or mental) you might want to look into setting up a Supplemental Needs Trust as part of a comprehensive estate plan that addresses all of the likeliest outcomes, and then some.

 

Here’s how an SNT works: 

If someone is receiving means-tested benefits, such as Social Security Disability Insurance (SSDI), their income must remain under a certain limit set by the government in order to qualify for those benefits. This income is checked every month and even one month in which a person receives a large sum of money (like an inheritance after someone passes away) could kick them off of their benefits program, forcing them to re-apply next month. The application process for SSDI is generally lengthy, difficult, and something that folks don’t want to go through multiple times. 

Even an inheritance of $1,000 could be enough to put your loved one over the SSDI income limit. Since a trust keeps assets outside of someone’s ownership, your loved one receiving benefits can access those funds in very limited, but incredibly helpful ways. The laws surrounding SNTs are very exacting and specific; unless you take time to work with an attorney experienced in this field, your efforts may end up putting your loved one in jeopardy of losing their benefits.

Trusts are legal documents dictating how, when, and where you’d like your assets to be distributed and/or used. A Supplemental Needs Trust can be set up at any time and can be designed to only go into effect under the specific circumstances you name in the trust. To make sure your trust documents work in your intended way, please seek the counsel of a licensed attorney in your area with experience in Supplemental/Special Needs Trusts. Supplemental Needs Trusts are often drafted alongside Wills, and other estate planning documents, to make sure they are designed to work together.

 

Types of SNTs 

There are two main types of SNTs. First Party SNTs are established with money that originally belonged to the person receiving benefits, while Third Party SNTs are established with money from someone else, often parents or siblings.

Both types of SNT are limited in the kind of expenses that they are allowed to pay for, but First Party SNTs have an extra limitation that Third Party SNTs do not. First Party SNTs are required to include a clause that causes the assets in a First Party SNT to go to the state where the beneficiary is living, and the State will use those funds to add to their benefits program. Third Party SNTs can name a beneficiary to receive the assets held by the trust after the first beneficiary passes away.

Although SNTs have limitations placed on them regarding what the assets inside the Trust can be used to pay for,  they can improve the services and equipment accessible to your loved ones. Ask about state-specific ABLE accounts too, these are new tools that are designed to be used with SNTs to increase your loved ones quality of life across the board!  

It is important to correctly identify the type of SNT that fits your situation, otherwise you run the risk of having the SNT invalidated, which could cause many other problems down the line. Meet with an experienced attorney in your area. 

 

April is Autism Awareness Month

Autism Acceptance/Awareness Month, also celebrated as “World Autism Awareness Day” (April 2) is observed worldwide as a time to learn more about Autism Spectrum Disorder (ASD) and ways in which you can support autistic people. According to an article on Healthline, “Autism is considered a disability from a medical and legal standpoint. But according to mental health professionals, not everyone with autism identifies as being disabled.” 

Just like with any other disability, the autistic community is not a monolith. Each person receiving SSDI has their own specific needs, goals, interests, and desires. It is important to consult your disabled loved one and/or the caregiver(s) most knowledgeable about their daily care needs before making the financial decision to set up a Supplemental Needs Trust for them. 

In most cases, it is harmless to create an SNT for someone who might not end up receiving means-tested government benefits, but it is even better to respect the autonomy of the disabled people in your life and discuss the pros and cons of setting up a Supplemental Needs Trust for them to use if/when the time comes. 

By placing money and assets into a trust, you protect yourself, your trustees, beneficiaries, and your assets themselves. It is better to have a plan and not need it than to need a plan but not have one.

Blunders in Estate Planning May Lead to Breach of Family Harmony

The Financial Post’s recent article entitled “Avoid these five mistakes when estate planning to preserve family peace” provides us with some of the biggest mistakes:

1. Treating family members differently. People do this frequently. They may have valid reasons for doing so. However, it’s still not a great idea. Instead, comfortably tell your children in advance why you’re doing this. This will avoid anger and jealousy between the children when they discover this. Try to leave assets equally, even if you don’t think it is fair.
2. Pass the family vacation home to multiple children. It's best to either sell the home in your later years or, if you keep it, make sure it is openly discussed. You might set up life insurance to specifically pay taxes and perhaps one or two children, so the remaining children can afford to keep the cottage. Even so, a sale is the cleanest approach.
3. Don’t tell the children anything about your money. Not a good idea. This approach often eliminates any ability to understand what might be most meaningful to your children or beneficiaries. Maybe less so in terms of cash, but in terms of family heirlooms or property. Perhaps a favorite piece of furniture was really important to two children, but there was never any discussion about it. As a result, it’s now completely left to them to fight over. This may sound like a small issue. However, many families have split up forever over just this type of scenario.
4. Purposely or inadvertently leaving most or all assets to a new spouse. It can occur by accident due to poor planning around ownership titles, lack of pre-nuptial agreements or the unintended naming of beneficiaries on investment accounts or life insurance. However, sometimes, it’s meant to hurt the children. The hurt can certainly go both ways and is frequently a major issue when a spouse isn’t treated fairly. Ask an experienced estate planning attorney to walk through this with you.
5. Significant charitable giving. If your gifts to charity aren’t discussed with your so-called traditional beneficiaries, there can be conflicts with the charity that can be drawn out.

Communicate what you’re doing and why to your family.

Reference: Financial Post (Nov. 9, 2022) “Avoid these five mistakes when estate planning to preserve family peace”

 

Exactly Why Do I Need a Will?

Some people mistakenly think not having a will allows their assets to bypass the time and expense of probate. That’s not true–if you die without a will, your property still must go through probate, says Fed Week’s recent article entitled “The Importance of Having a Will.”

If probate avoidance is an issue, you can create a revocable trust to keep control over the trust assets while you’re alive.

Assets placed in trust during your lifetime can be distributed at your death, under the terms of the trust, without going through probate.

There are many types of trusts, and they all establish a financial arrangement between three parties:

• The Trustor
• The Trustee; and
• The Beneficiaries.

The person creating the trust is known as the trustor or grantor. The trustee manages the trust and disperses income or principal from the trust according to specific terms.

When you draft a will, you shouldn’t forget about it. Any births, deaths, marriages or divorces all may create a need to revisit your so-called “last wishes.”

After each change, make sure your current will is both safe and accessible. You can leave your will with your executor. If you decide to keep your will somewhere else, your executor and other family members should know its location. The estate planning attorney who prepared your will should have a copy, as well as a memo revealing the location of the original.

Regardless of where you put your will, have another document for your funeral and burial instructions. Wills generally aren’t read until days or weeks after death, so that won’t help your family make prompt decisions about a funeral or a memorial service.

As a result, a separate letter should be used to specify your final wishes and your executor should know where these instructions can be found.

Ask an experienced estate planning attorney to help you write your will.

Reference: Fed Week (Nov. 2, 2022) “The Importance of Having a Will”

Do I Need an Estate Plan If I’m 25?

Florida Today’s recent article entitled “No matter your age, income or crushing debt, you should have an estate plan” explains that the purpose of a good estate plan is that it allows you to maintain control over how your assets are distributed if you die.

It names someone to make decisions for you, if you can no longer act for yourself. Let’s look at the different documents that are necessary.

Power of attorney: If you become incapacitated, someone still needs to pay your bills and handle your finances. A POA names the person you’d want to have that responsibility.

Health care surrogate: This document is used if you become incapacitated and appoints the individual whom you want to make health care decisions on your behalf.

Last will and testament: This document designates both who oversees your estate, who gets your assets and how they should be transferred.

Beneficiary designations: Part of your planning is to name who should receive money from life insurance policies, annuities, retirement accounts and other financial accounts.

HIPAA Waiver: This is a legal document that allows an individual’s health information to be used or disclosed to a third party. Without this, loved ones may not be able to be a part of decisions and treatment.

Trust. A trust can facilitate passing property to your heirs and potentially provide tax benefits for both you and your beneficiaries.

As you can see, there are a number of reasons to have an estate plan.

Estate planning isn't only for the rich, and it doesn't have to be overly complicated.

An experienced estate planning lawyer, also called a trusts and estates attorney, can work with you to create an estate plan customized to your needs, financial affairs and family situation.

Putting your wishes in writing will make certain that your affairs are in order for now and in the future and help your family.

Reference: Florida Today (May 28, 2022) “No matter your age, income or crushing debt, you should have an estate plan”

How Do I Pick a Life Insurance Beneficiary?

If you’re married, unless there are very unusual circumstances, your spouse should be the beneficiary, especially if you live in a community property state.

A community property state is a state where any asset acquired during marriage is considered to be community property, which means it’s equally owned by each spouse. Any income that either spouse makes during the marriage is community income.

However, there are exceptions that permit spouses to own assets separately from each other. Gifts, inheritances and assets acquired before the marriage are all considered separate property.

There are only nine community property states, plus three states that allow residents to opt into community property law. The other 38 states plus Washington D.C. follow a common law property system where ownership of marital assets is more straightforward: whoever acquired the property owns it outright. However, a couple can choose to become joint owners, such as through a joint bank account.

If you’re now wondering which states are community property states, they are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin.

If you’re single, you might have a tougher time naming a life insurance beneficiary.

If you have minor children, ask a lawyer about naming a trust as beneficiary.

If you have a disabled family member, consider a special needs trust.

If you don't have a trust, you can name an adult family member or any other trusted person. However, remember that if you name an adult family member, once the proceeds are paid, those funds legally belong to that individual. Therefore, you better really trust that person and make certain that he or she understands that the funds need to be used for the intended minor child/children.

Finally, when making your decision, do so as if this account would be paid out tomorrow.

You should always consult with an estate planning attorney.

Reference: Cision (May 20, 2022) “How to Choose a Life Insurance Beneficiary”

What Is a TOD Beneficiary?

It’s possible to name a TOD beneficiary for many account types—retirement accounts, savings accounts and even brokerage accounts. This can help you and your heirs avoid the sometimes costly process of probate. You can name anyone. However, if you’re married, your spouse may have special rights over your assets that take precedence over your named TOD beneficiaries.

Investopedia’s recent article entitled “Who Can Be a Transfer on Death (TOD) Beneficiary?” explains that the rules are quite broad when it comes to naming TOD beneficiaries. A TOD beneficiary can be a person, charity, business, or trust. Let’s look at whom you can name as a TOD beneficiary, and why you would.

Naming a transfer on death (TOD) beneficiary for your accounts can make the inheritance process much simpler for your heirs and family. That’s because your named beneficiary will automatically get the assets in the account. Therefore, it bypasses probate.

The Uniform Transfer on Death Securities Registration Act lets owners designate beneficiaries for their stocks, bonds, or brokerage accounts.

You can also open a payable-on-death bank account to distribute cash assets after you pass away, without having to put them through probate.

In some states, even vehicles and real estate can be transferred by TOD.

A single person can name anyone as a beneficiary. However, a married person’s spouse may have rights to some or all of a retirement account upon death. A surviving spouse also may have more options for withdrawing money than other beneficiaries do. It depends on the rules that apply to each individual account.

You can also typically name as many TOD beneficiaries as you like. You can use these to specify the percentage of assets that each designated beneficiary should get.

Note that with TOD registration, the named beneficiaries have no access to or control over a person’s assets when the person’s alive, so you retain total control over your assets until you pass away.

Reference: Investopedia (May 19, 2022) “Who Can Be a Transfer on Death (TOD) Beneficiary?”

Do I Need to Update My Estate Plan?

It is generally recommended that you give your estate planning papers a checkup at least every couple of years, unless there are reasons to do it more frequently. Marriage, divorce, the birth or adoption of a child, coming into a lot of money, or moving to another state should prompt a review. CNBC’s recent article “Be sure to keep your will or estate plan updated. Here are 3 key reasons why” says that a top consideration for a review, is when there’s a major change in your life.

First, ask an experienced estate planning attorney to help you draft a will, if you do not have one. Second, if you are among those who have a will or comprehensive estate plan, here are some things to review:

Things change. It is important to review who you’ve named to be executor. That person is tasked with liquidating your accounts, ensuring your assets pass to the proper beneficiaries, paying any debts not discharged (i.e., taxes owed) and selling your home. You must also be sure that the guardian you have named to care for your children is still the person you’d want in that position.

Create a comprehensive estate plan. As part of estate planning, it is common to create other documents related to end-of-life issues. This includes powers of attorney, so that trusted individuals can make decisions on your behalf if you become incapacitated. Even if you have had no major life event, individuals you previously chose to handle certain duties may no longer be your best choice.

Account beneficiaries. Some assets pass outside of the will, like 401(k) plans, IRAs and life insurance proceeds. As a result, the person designated as a beneficiary on those accounts will get the money, no matter what your will states. Regular bank accounts can have beneficiaries listed on a payable-on-death form. However, if no beneficiary is listed on those accounts, or the named person has already died (and there is no contingent beneficiary listed), the assets will go into probate.

Home Ownership. If you own a home, make certain you understand how it should be titled to ensure it ends up with the person (or people) you intend, since the laws can vary from state to state. There can also be other considerations when it comes to how a house is titled, including protection from potential creditors or for tax reasons when the home is sold. Ask an experienced estate planning attorney to review your specific situation.

Reference: CNBC (Jan. 27, 2022) “Be sure to keep your will or estate plan updated. Here are 3 key reasons why”

Do Grandchildren Get Some of the Estate If Their Dad Dies before Me?

It’s not that uncommon that a child dies before a parent. The question then arises about who gets that share. Is it the children of the decedent child (the will maker’s grandchildren), or do the will maker’s other children split the share of the decedent child?
Nj.com’s recent article entitled “Who gets this inheritance if a beneficiary dies?” explains that the language of the will itself governs what happens with each beneficiary’s share in the event one of the adult children dies before his or her parents.
Some wills divide the remainder among the will maker’s children who are still living. With this, the surviving siblings would receive the entire estate.
This is called “per capita,” which is a Latin phrase that translates literally to “by head.” In a per capita distribution, each designated beneficiary receives an inheritance only if they’re living when the inheritance vests (at the will maker’s death).
If a beneficiary dies before this, that beneficiary’s share is divided among the surviving named beneficiaries. As a result, the children of the decedent beneficiary get nothing, unless they are specifically designated as beneficiaries.
However, the more common approach is for a will to state: “I give, devise and bequeath my residuary estate to my descendants, per stirpes.”
Per stirpes is a Latin phrase that translates literally to “by roots” or “by branch.” A per stirpes distribution means that a beneficiary’s share passes to their lineal descendants if the beneficiary dies before the inheritance vests. Per stirpes effectively designates a class of beneficiaries to receive estate property, rather than designating only specific individuals to inherit property.
Therefore, providing this language in the will means that if a child predeceases the testator and the predeceased child has surviving descendants, that predeceased child’s share will go to that predeceased child’s descendants … that would be the will maker’s grandchildren.
Ask an experienced estate planning attorney about how each of these designations would work in your specific situation, when you draft or update your will.
Reference: nj.com (Oct. 28, 2021) “Who gets this inheritance if a beneficiary dies?”

What Is Probate?

WTOP’s recent article entitled “Everything You Need to Know About Probate” explains that probate is the court-supervised proceeding, in which the assets of the decedent are distributed to his or her heirs. This involves validating the decedent’s will, distributing assets and ensuring that the debts of the estate are paid.
Probate is how assets formally pass from one person who passed away to their heirs or beneficiaries. Probate can be long and complex or pretty efficient. Each state has its own probate code, and some have a small estate probate process for estates that are under a certain threshold. The administration of the estate involves the executor or personal representative, beneficiaries, creditors and a probate judge.
The probate process is required by state law to manage the decedent’s assets and property that aren’t transferred by contract law, state titling law, or trust law. As a result, any assets or property awarded in a last will or assets owned by an individual who dies without a will may require probate.
Property that passes through probate includes assets and property awarded to heirs through a will, such as household goods, automobiles and personal property owned at death but not awarded in the will and not otherwise transferred.
If a person dies intestate or without a valid will, the disposition of their probate property will be controlled by the laws of intestacy of the state where the decedent resided at death. Probate property is all property that was held individually and that does not have a beneficiary designation.
Each state has its own probate process. However, the first step in probate generally is to produce a will. A probate attorney can determine if all of the heirs will consent to have it probated. If there’s not going to be any objection, the attorney can prepare the probate documents and have the waivers signed by the distributees. Once they sign and notarize the consent, the attorney can take the will with the probate documents and have it filed.
After a will is deemed valid, the executor of the estate and the attorney will file certain documentation with the court. This might include the will, a certified copy of the death certificate, a list of names and addresses of the decedent’s heirs and any known creditors. Creditors will be paid first, then the remaining assets are distributed to the heirs. After any required tax returns are filed, the executor will ask the court to close the estate.
Reference: WTOP (Aug. 31, 20211) “Everything You Need to Know About Probate”

Should I Ask Mom and Pop about Their Finances?

Adult children should know about their parents’ finances in case of any emergency. They should also know critical information in case of death. NASDAQ’s recent article entitled “9 Questions to Ask Aging Parents About Their Finances” acknowledges that speaking to aging parents about their finances isn’t easy. However, to start this process, the article gives us nine important topics you may want to discuss with your parents:
Do You Have a Financial Plan (and is it enough)? See if your parents have a financial plan. Some parents will have a solid financial plan that will let them to live comfortably into their 80s or 90s. On the other hand, you may discover they’re living on a fixed budget and money is tight. If you see that you’ll need to help them financially now or in the future, start planning ASAP. Any decision to provide them with financial support will likely have an effect on your own financial plan.
Do You Have an Accessible List of All Your Accounts? Ask your parents to draft a list of their financial assets and those named as beneficiaries of those accounts and keep it in a safe place. They should also put together important contacts, such as clergy, CPA, estate planning attorney, physician, etc.
Where’s Your Will, and Who’s the Executor? See where your parents keep their wills and estate documents. Some estate planning attorneys retain an original copy. If your parents don’t have a will, encourage them to see an estate attorney. An item that’s not commonly listed in the will, that you may want to ask about, is if your parents have prepaid for a burial plot or memorial arrangements.
Do You Have Life Insurance Policies that I Should Know About? See if your parents have any active life insurance policies. Get the details of the policies and the policy numbers. If your parents are still working, they may also have life insurance through an employer.
Are There Any Special Bequests to Family and Friends? Family heirlooms and special personal property may be a part of your parents’ estate plan. A sibling may have claimed your dad’s coin collection. Knowing your parents’ intentions and wishes for their keepsakes will make things much easier when they pass. Moreover, having conversations about family heirlooms now can help prevent any hard feelings later. Some people make up a list for their personal bequests and reference it in their wills.
Who Have You Named as Your Financial Power of Attorney? This document lets your parents name a primary and secondary person to make financial decisions on their behalf, if they become incapacitated. If you’re the one named as the person to make financial decisions, find out where all of your parents’ financial assets are held. You should also get information about their Medicare policy, any pensions and their Social Security benefits. It even helps to know their utility companies in case you need to pay these bills and must prove power of attorney.
Do You Have a Living Will? They should each have an advance health care directive or living will and health care power of attorney. These documents designate who has authority to make medical decisions on their behalf, if they became incapacitated or terminally ill. This also includes your parents’ preferences for life-sustaining treatment, including a “Do Not Resuscitate” clause, as well as their preferences on organ donation.
Have You Had Trouble Balancing Your Checkbook Lately or Forgotten to Pay Bills? Have a discussion about key financial decisions with your parents while they are in good health. This will let you make a plan, if they show signs of memory loss. The signs of memory loss include forgetting appointments, making occasional errors while managing household finances, or getting confused about the day of the week.
Do You Have a Long-Term Care Policy? To claim benefits of long-term care insurance, a person typically needs to be unable to perform two out of six common “activities of daily living” (bathing, dressing, toileting, eating, transferring and continence) or have a severe cognitive disorder. If your parents have a policy, access it and review its core benefits, in case you need to help them file a claim.
Discussing your parents’ financial and estate plans isn’t fun, but it will help give both you and your parents some peace of mind to know that they will be provided for, and things will be taken care of in their absence.
Reference: NASDAQ (Aug. 27, 2021) “9 Questions to Ask Aging Parents About Their Finances”